Pressure to end legal self-regulation

THE Government is coming under increasing pressure to end self-regulation of the legal profession after two solicitors had their businesses closed down when it was discovered they abused their positions to take out millions of euro from various banks.

The High Court heard yesterday that Dublin-based solicitor Michael Lynn, 39, accessed about €26 million from 10 banks by taking out a number of mortgages on the same properties.

A second Dublin solicitor, Thomas Byrne, has gone missing since IIB Bank began proceedings to recover €9m from him.

It is alleged the men were granted mortgages using solicitor’s undertakings — letters of promise used by solicitors to close property deals without producing title records to the lender.

There is concern among the legal profession that court actions taken by various banks against both men could result in a wipe-out of the Law Society’s compensation fund.

All solicitors pay an annual fee of €400 into the fund, which is used to protect clients who lose money through the dishonesty of their solicitor.

The fund is worth €34m and it is believed the banks in question will make claims from the fund. They will have to establish whether or not they are clients of the solicitors in question.

Solicitors are concerned that a heavy and unprecedented claim on the fund might require them to make higher payments in the future.

Sources in the Law Society, the regulatory body for the legal profession which carried out the original investigations into these two solicitors, said there was no evidence to suggest that the property deeds of clients of either men were affected.

“The property they borrowed from was wholly owned by the solicitors in question. Now some of the biggest financial institutions are wading in and chasing money that they themselves lent to a solicitor,” a source said.

Solicitor Gerald Keane told RTÉ Radio yesterday that the financial institutions themselves have a lot of questions to answer.

“There’s a fundamental issue that has to be addressed here and that is: how or why the banks and building societies have allowed this situation to evolve and how they have facilitated what seems to be activities of concern to everybody,” he said.

“If I was a shareholder in a bank or a building society, I would be seriously concerned that money is being lashed out in this manner to solicitors or any profession, on simple letters of promise.”

Chief executive of the National Consumer Agency, Anne Fitzgerald, said the cases prove “self-regulation doesn’t work”.

“If banks have been foolish enough to get themselves into a situation whereby they have lent up to €50m, then they are big boys and they will have to sort that out. If there are customers out there who may be in situations where the titles of their properties are in question, we would suggest that information needs to go out to clients on the general protections available to them.

“Perhaps this is the opportunity to revisit the self-regulation of solicitors by the Law Society because you cannot both regulate, represent and be paid for by your members.”

The Law Society said it is not investigating any other solicitors for similar practices.